Thursday, November 20, 2008

American credit score policies should change

Credit score companies in America should change their ways as a matter of progressive social policy. They should allow us all to see our own credit scores without punishing consumers for checking their own scores. They should improve their software to allow credit score availability to consumers (of their own scores).

To be clear, it makes no more sense that one cannot check one's credit score than if a bank charged $200.00 every time a client checked on her bank balance or if a weigh scale added twenty pounds (by mistake) every time a man checked his weight. If that always happened, banks would lose customers and weigh scales would be tossed.

This is important because if a person cannot get credit, it can be more devastating than simply getting a speeding ticket for going over a speed limit. It can limit availability of food, clothing and shelter and thereby create social distress and further unrest and inequality.

Instead, credit checkers charge us to see our scores and punish our scores by lowering them if we check them often. It's so unfair and uncivilized to consumers.

Laws favor powerful credit score companies far above individual human rights and it has always been a policy that is wrong, wrong, wrong.

Since the system breeds inaccuracy because of the lack of transparency, and the unaccountability and secretiveness of the scorers, it is time for it to be changed. When and how will this stop when it is so much a part of the system? It's a hard problem. It will take legislation to correct and improve credit checking and prohibit scorers from abusing their power as they currently do.

Why can't credit lender inquiries be separated from self-check inquiries? If credit scorers had to, by law, they could easily make computer programs that allow it to happen. Password-protected sites (or variations thereof) could be implemented to protect consumers checking their own scores. The results would produce clearer pictures of creditworthiness for all.

Many lenders and vendors hoped that with the advent of computers, this credit score problem that has long existed would finally be corrected. It hasn't been. The credit system unfairly persists in unjustly and secretly lowering scores for credit-checking our own scores. It also has not done well warning affected individuals, ultimately all of us.

The following quote from Wikipedia concerning "credit scores" highlights the very problem many are having now, impacting mortgage lending (and housing prices) and consumer behaviors (buying nearly everything else):

....."hard" credit inquiries are made by lenders when consumers are seeking credit or a loan. Lenders, when granted a permissible purpose, as defined by the Fair Credit Reporting Act, can check a credit history for the purposes of extending credit to a consumer. Hard inquiries from lenders directly affect the borrower's credit score. Keeping credit inquiries to a minimum can help a person's credit rating. A lender may perceive many inquiries over a short period of time on a person's report as a signal that the person is in financial difficulty and is looking for loans and will possibly consider that person a poor credit risk.

The truth is, that it generally does hurt to get a credit check of our own credit, or at least, the rumor persists that checking our own scores lowers them. Credit checks from multiple unspecified sources lower scores, we know that from the quote above. While some work has been done by credit scoring companies to open up, rumors indicate that frequent inquiries still lower scores because computer programs do not distinguish sources of credit score requests. The truth is that despite having "free access to records" we definitely have to pay to receive our own scores. This is a disservice to all consumers who would prefer to check our own scores at will.

The point is that the way scores are now created and lowered (uncontrollably and erroneously at times) destroys lives and is an increasing and dangerous problem because of the wide use of the internet amid newly-tightened lending requirements. Of course, I am not advocating publishing credit scores indiscriminately and publicly in newspapers or on the internet. Keeping records private is of paramount importance.

This problem came up in discussions today with car dealers while I was looking for a new car. By the way, I don't think there is anything wrong with my credit score though I am not about to check and possibly lower it to find out. But I, for one, would just love to be able to check my score for free as often as I want to without being threatened with punishment by credit score companies who are holding all of the cards and are unaccountably secretive. So would everyone else. I am completely sure of that. Easy technically, the current unfair system should finally be changed. Let's hope the new Administration can better serve individuals. Those credit score companies are far louder and more aggressive than any one taxpayer.

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